Marketplace Consumer Loan ABS Indices: August 2023

August remittance reports showed mixed credit performance across securitized marketplace consumer loan pools during the July collection period. Annualized net losses landed at 7.73% and 16.40% in our Tier 1 and Tier 2 indices, respectively, down 209 basis points (bps) and 307 bps month-over-month (MoM), but up 187 bps and 652 bps year-over-year (YoY) (see Figure 1). The MoM net loss improvement in both Tier 1 and Tier 2 indices was largely driven by a combination of lower charge-offs and higher recoveries in 2021 and 2022 vintage securitizations. In contrast, the percentage of borrowers at least 30 days past due inched up across both indices, rising 24 bps MoM and 125 bps YoY to 3.76% in the Tier 1 index, and 16 bps MoM and 156 bps YoY to 6.46% in our Tier 2 index (see Figure 2).

Despite cooling inflation indicators and the expectation of a more dovish Federal Reserve, we expect that the resumption of federal student loan payments in October, softening consumer credit fundamentals,…